Does Enforcement of Intellectual Property Rights Matter in China ...

Table 5: The effect of IP rights enforcement on R&D investment
The dependent variable is research and development expenditure of firm i in a given year divided by start-of-the-year total
assets. For a description of all the other variables, see Appendix 3. All regressions include industry dummies as control
variables. All independent variables are lagged by one year, except the funding source variables. The coefficients reported
in Column (1), (2), (4) and (5) are from OLS regressions. Column (3) and (6) present results obtained from the IV
regressions, with the instruments being the provincial number of Christian colleges by 1920 (Christian Colleges) and the
dummy which equals 1 when a province had a British concession during the late Qing Dynasty (British Settlement). Other
covariates in the first-stage regression are omitted for presentational convenience. The numbers in the parentheses are t-stat
based on standard errors adjusted for heteroskedasticity and the potential clustering of the residual at the provincial level.
***, **, * indicate the coefficient is statistically different from zero at the 1-, 5-, and 10-percent level, respectively.
Model OLS OLS
Dependent variables
(1) (2) (3) (4) (5) (6)
2SLS: Second
stage
OLS OLS
R&D
Intensity
R&D
Intensity
R&D Intensity
R&D
Intensity
R&D
Intensity
2SLS: Second
stage
R&D Intensity
New Debt/Assets 0.009 0.009 0.006 0.021 0.021 0.019
(0.71) (0.72) (0.49) (1.65)* (1.66)* (1.23)
New External Equity/Assets 0.009 0.009 0.006 0.021 0.021 0.019
(0.71) (0.72) (0.50) (1.65)* (1.66)* (1.23)
New Internal Finance/Assets 0.046 0.046 0.059 0.075 0.074 0.067
(2.62)*** (2.60)*** (2.71)*** (3.78)*** (3.71)*** (3.40)***
IPP1×New Debt/Assets 0.087 0.088 0.103
(5.02)*** (5.05)*** (5.40)***
IPP1×New External Equity/Assets 0.028 0.029 0.034
(0.99) (1.03) (1.17)
IPP1×New Internal Financing/Assets 0.183 0.181 0.141
(5.38)*** (5.27)*** (3.19)***
IPP1 0.022 -0.019 0.073
(0.83) (-0.82) (1.01)
IPP2×New Debt/Assets 0.005 0.005 0.006
(5.71)*** (5.77)*** (4.23)***
IPP2×New External Equity/Assets 0.001 0.001 0.002
(0.73) (0.76) (0.70)
IPP2×New Internal Financing/Assets 0.007 0.007 0.009
(3.16)*** (3.14)*** (3.02)***
IPP2 -0.0001 -0.001 0.001
(-0.16) (2.56)** (1.14)
Corruption Control 0.001 0.002 0.001 -0.002
(0.37) (1.31) (0.54) (-0.43)
Banking Development 0.006 0.002 0.006 0.005
(3.88)*** (1.07) (3.65)*** (3.32)***
GDP Growth 0.369 0.237 0.267 0.451
(1.74)* (1.24) (0.88) (1.17)
University -0.0002 -0.0002 -0.0002 -0.001
(-0.51) (-0.77) (-1.05) (-1.55)
Metropolis -0.004 -0.001 -0.003 0.003
(-2.45)** (-0.34) (-2.04)** (0.77)
Constant 0.017 -0.025 -0.069 0.032 -0.022 -0.012
(0.85) (-1.07) (-1.62) (4.36)*** (1.29) (-0.73)
Observations 23,821 23,821 23,821 21,655 21,655 21,655
R-squared 1.76% 1.89% 1.81% 1.69% 1.80% 1.70%
First Stage
Regression
First Stage
Regression
Dependent variables IPP1 IPP2
40